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Bureau of Mines Information Circular/1980 




The U.S. Copper Mining Industry 

A Perspective on Financial Health 



By T. T. Tomimatsu 




i UNITED STATES DEPARTMENT OF THE INTERIOR 



Information Circular 8836 

The U.S. Copper Mining Industry 

A Perspective on Financial Health 
By T. T. Tomimatsu 




UNITED STATES DEPARTMENT OF THE INTERIOR 
Cecil D. Andrus, Secretary 

BUREAU OF MINES 

Lindsay D. Norman, Acting Director 








This publication has been cataloged as follows: 



Tomimatsu, T T 

The U.S. copper mining industry: A perspective on financial 
health. 

(Information circular - U.S. Bureau of Mines ; 8836) 
Bibliography: p. 

1. Copper industry and trade— United States— Finance^ 2- Copper 
mines and mining— United States— Finance. I. Title. II. United States. 
Bureau of Mines. Information circular : 8836. 



-HD9539^€5UJS36- 



338.2'3 



80-607792 



For sale by the Superintendent of Documents^ U.S. Government Printing Office 

Washington, D.C. 2040 2 



CONTENTS 



PoRf 

Abstract 1 

Introduction — 1 

Quality and reliability of corporate data and 

information - — 3 

Overview of the U.S. copper mining industry 5 

Consumption 5 

Production 5 

Other important factors 6 

Outlook --- 7 

National security aspects - 8 

Financial economic analysis and assessment — 14. 

largest U.S. copper producers 9 

Definitions and quantitative performance 

measurements --.- 9 



PnfTf 

Financial investigation of 14 largest U.S copper 

companies 10 

Environmental policy and its impact 11 

Corporate taxation and its impact - 12 

Dynamics of corporate structure and behavior 14 

Diversification and merger 14 

Interconnections among copper firms 15 

Copper investment strategy-domestic versus 

foreign 16 

New financing methods 17 

Summary of trends in the U.S. copper mining 

industry and conclusions 19 

References 20 



ILLUSTRATIONS 

Puffe 

1. U.S copper mine production compared with rest-of-world production for 1969, 1978, and 2000 (forecast) 8 

2. Comparison of estimated rates of return on stockholder's equity, 1969-78 12 

3. Leading U.S copper producers foreign investment fiows 17 



TABLES 



1. Fourteen leading U.S. copper producers' U.S. production contrasted to total U.S. and rest-of-world copper 

production, 1969-78 6 

2. Percent of U.S. copper production by top copper producing companies in 1936 and 1978 7 

3. Primary copper production, 1978 and 2000 (forecast) 8 

4. Fourteen leading U.S. copper producers, return on stockholder's equity, 1969-78 9 

5. Fourteen leading U.S. copper producers, return on invested capital, 1969-78 10 

6. Long-term debt-equity ratios for each of 14 leading U.S. copper producers 11 

7. Fourteen leading U.S. copper producers, capital expenditures, 1969-78 12 

8. Fourteen leading U.S. copper producers, effective income lax rates, 1969-78 13 

9. Fourteen leading U.S copper producers, shift in corporate business composition, 1969-78 14 

10. Industry affiliation of selected copper producing groups in 1978 15 

11. Petroleum companies connections with the copper industry, yearend 1979 16 

12. Composition of boards of directors of copper producers, 1978 16 









4^ 



THE U.S. COPPER MINING INDUSTRY 

A PERSPECTIVE ON FINANCIAL HEALTH 

by 
T.T. Tomimatsu* 



ABSTRACT 



This Bureau of Mines paper investigates, explores, and analyzes the corporate 
structure dynamics and financial ratios to evaluate the economic health of the U.S. 
copper producers. It highlights the corporate policy options and measures of cor- 
porate profitability and suggests that a competitive domestic copper industry will 
exist in the future. 

The study highlights the activities of 14 selected major copper-producing com- 
panies, including their subsidiaries or affiliates, that were responsible for more 
than 95 percent of the total U.S. production in each of the years since 1969. The 
selected firms are not all primarily in the business of producing copper. Several 
of the large producers are classified by the financial institutions as integrated oil 
and gas enterprises. 

INTRODUCTION 



One of the responsibilities of the Bureau of 
Mines is to investigate the economic conditions 
affecting the mineral industries. This is in con- 
cert with the Mining and Minerals Policy Act of 
1970, one of the requirements of which is as- 
sessment of the state of the domestic mining 
industry {29y'^. This paper pursues this mission 
through financial economic investigation and 
analysis to interpret the economic well-being of 
the U.S. copper industry. Large quantities of 
corporate information and data have been col- 
lected and analyzed to provide new insights into 
corporate dynamics, and to assess the copper 
industry's capability of generating the huge 
amount of capital required for exploration, de- 
velopment of new mines, improvement of ex- 



' Cerlified Public Accountant, financial economist. Branch of Technical Analy- 
sis, Bureau of Mines, Washington. D.C. 

^ Italic numbers in parentheses refer to items in the list of references at the end 
of this report. 



isting mines, and effecting technological im- 
provements in productivity. 

Fourteen U.S. copper companies were se- 
lected on the basis of their U.S. copper output. 
Each year, since 1969, the selected companies' 
production represented more than 95 percent 
of the total national copper production. These 
companies' share of the total U.S. copper pro- 
duction rose to 98 percent in 1978. The financial 
actions, policies, decisions, and trends of these 
copper companies provide the key indicators to 
the state of the U.S. copper industry. 

This Bureau of Mines report presents a 10- 
year copper industry analysis, covering a period 
in which, in addition to the prevalent unstable 
copper prices, the industry was subject to peri- 
odic strikes, price controls (1973-74), and huge 
capital expenditures for environmental and pol- 
lution control facilities (societal expenditures). 

Within the past 10-year period (1969-78), the 
copper end-use pattern has not changed mate- 



1 



2 



rially, except the very small offsetting percent- 
age increases and decreases among the five cat- 
egories. It is important to note, however, that 
net imports of copper have more than doubled 
during the past 10 years. 

Copper prices are extremely sensitive to 
changes in supply and demand, and they are set 
under several different pricing mechanisms. A 
capacity-demand imbalance together with the 
slowdown in the U.S. economy depressed cop- 
per prices for an unusually long period of time 
(1974—78), during which some producers shipped 
copper on a consignment basis. The largest do- 
mestic copper mining company relinquished its 



rights to set prices and adopted the pricing basis 
of the New York Commodity Exchange 
(COMEX), the organized marketplace for con- 
tracts for future delivery of copper. Subse- 
quently, other major copper producers followed 
this pricing mechanism. In the last half of 1978, 
excess inventories of copper were reduced. 
Since then, prices have moved upward. Accord- 
ingly, the economic health has improved for sev- 
eral copper mining firms. For example, an in- 
crease of only 1 cent per pound in copper prices 
generates improvements in cash flow and prof- 
its. Currently, the basic copper price is exempt 
from the price guidelines of the Council on 
Wage and Price Stability (COWPS). 



QUALITY AND RELIABILITY OF BUSINESS DATA AND INFORMATION 



The U.S. Government requires all publicly 
held companies to register with the Securities 
and Exchange Commission and to file reports 
on their business operations. The following re- 
quired documents and other optional materials 
were used in this investigation: 

• Annual and Quarterly Reports to Share- 
holders. 

• Annual Report Form 10-K, the authorita- 
tive report of the company; 10-Q quarterly 
reports; monthly reports of significant 
events; Proxy Statements; Securities Reg- 
istration, S-1; and Prospectuses to the Se- 
curities and Exchange Commission. These 
reports are company information filed with 
and made public by the Securities and Ex- 
change Commission. This research study 
considers these reports as final informa- 
tion. 

• Special reports for security analyst meet- 
ings, companies' news releases, and general 
reports released to equity holders. 

• Testimony before selected Congressional 
special committees by the selected compa- 
nies and their subsidiaries. 

These sources have been supplemented by 
personal conversations with executive officers 



of the involved companies and by information 
developed from other sources as well as by lit- 
erature reviews of many technical periodicals 
and reports. 

The current required disclosures have im- 
proved the quality and quantity of financial and 
economic data and were helpful in this research 
effort. However, because of nonstandardization 
in reporting, the investigation required critical 
in-depth analysis in the selection of relevant in- 
formation. These data were specifically gath- 
ered, analyzed, interpreted, developed, and 
published for this purpose and are not frag- 
mented with gaps, omissions, or duplications. 
Every attempt has been made to utilize data sup- 
plied by the companies pursuant to law. 

No attempt was made to show the impact on 
profitability of such variables as application of 
alternative methods of accounting; that is, in in- 
ventory accounting — LIFO (last-in, first-out) 
versus FIFO (first-in, flrst-out), capitalizing fi- 
nance costs during construction, expensing cur- 
rently to operations, deferrable costs, etc. How- 
ever, sufficient relevant data on a vast array of 
economic information were collected, analyzed, 
documented, and evaluated to develop an eco- 
nomic-financial conclusion. 



OVERVIEW OF THE U.S. COPPER MINING INDUSTRY 



Copper has been used for more than 6,000 
years and is one of the world's oldest known 
metals. Early uses of copper were in tools, weap- 
ons, and ornaments. Bronze — an alloy of copper 
and tin — and brass — an alloy of copper and 
zinc — have also been used extensively. In the 
nineteenth and twentieth centuries, copper has 
been used heavily in electrical equipment and 
power distribution systems. Although substitute 
materials have been developed, the production 
and use of copper have increased steadily, and 
this trend is projected to continue beyond the 
year 2000 (22). 

CONSUMPTION 

U.S. copper consumption has grown by about 
9.1 percent to 2.478 million tons in 1978 from 
2.271 million tons in 1969 (22). This low growth 
probably reflects the maturity of the U.S. copper 
market compared with that of other countries 
and the fact that the United States now imports 
a much greater amount of manufactured goods 
that probably contain finished copper. Exclud- 
ing scrap, U.S. consumption of primary copper 
accounted for less than one-fourth of total world 
use in 1978, down from about 27 percent in 
1969. 

The major end-use of copper in the United 
States is for electrical equipment and supplies, 
which accounted for about 58 percent of total 
U.S. consumption in 1978. Copper is used in 
electric motors, power generators, power distri- 
bution systems, and other wiring. Copper is also 
used in construction materials (about 19 percent 
of 1978 use) for roofing, plumbing, and bronze 
and brass hardware for buildings and homes. 
Use of copper is important in nonelectrical ma- 
chinery (9 percent of 1978 consumption), such 
as commercial air conditioning, and in trans- 
portation equipment (9 percent of 1978 con- 
sumption), such as automotive and marine parts. 
Consumption in ordnance and miscellaneous 
products accounted for the remainder of U.S 
copper use in 1978. 

The most notable substitute for copper is alu- 
minum, particularly in power transmission ca- 
bles. In the future, fiber optics may replace cop- 
per in some telephone transmission lines (22). 



PRODUCTION 

U.S. copper production has stagnated over 
the 1969-78 period; high costs of meeting U.S. 
environmental standards and the availability of 
lower priced imported copper has led to a sig- 
nificant amount of excess capacity in the United 
States. In 1978, U.S. copper mine production 
was about 1.5 million tons out of total mine ca- 
pacity of 2 million tons. As a result, U.S. pro- 
duction was above 1.7 million tons in only 2 of 
these 10 years. On the other hand, estimated 
annual world production increased significantly 
during the 1969-78 period, rising from about 
6.2 million tons to 8.2 million tons. 

Table 1 shows that of the 14 major U.S. cop- 
per producers {1-4, 6, 10-12, 15, 18-21, 41), 
only five have increased copper output over the 
1969—78 period and that their increased pro- 
duction resulted in lower production by the rest 
of U.S. copper mining firms. Coupled with in- 
creased competition from foreign producers, 
this trend may indicate that the five companies 
with increased output over the decade — New- 
mont, Pennzoil, Asarco, Amax, and Cities Serv- 
ice — were able to produce copper at a lower cost 
than other U.S firms. Kennecott appeared to 
lose the most during the decade, with its U.S. 
production dropping by about 178,000 tons, or 
almost 36 percent. 

The largest copper companies in the United 
States are vertically integrated; that is, they op- 
erate in all major phases of the industry — min- 
ing (removal of ore from the earth), concentra- 
tion, smelting (processing of ore for the metal), 
and refining (purification of the metal). Some 
even have operations that fabricate part of their 
output into tubing, wire, and other end-use 
products. This vertical integration resulted from 
the significant economies of scale gained from 
the operation of very large mining and proc- 
essing operations. 

Despite this tendency towards vertical inte- 
gration, the domestic copper market has become 
more competitive. Table 2 shows that the con- 
centration of U.S. copper production in the larg- 
est firms has declined over the last 40 years from 
about 75 percent to about 63 percent because 
of new entrants into copper mining {14). Fur- 



Table 1. — Fourteen leading U.S. copper producers' U.S. production contrasted to total U.S. and 

rest-of-world copper production, 1969—78 



(l^ousand short tons) 



Companies 



1969 



1970 



1971 



1972 



1973 



1974 



1975 



1976 



1977 



1978 



Kennecott Copper Corp.' 

Phelps Dodge Corp 

AUantic Richfield Co.^ 

Newmont Mining Corp 

Pennzoil Co - - 

ASARCO Inc.' 

Inspiration Consolidated Copper Co.'' 

Amax Inc.^ __. 

Cities Service Co ,-. 

Cyprus Mines Corp."' 

Louisiana Land and Exploration Co.*^ _. 

Hecia Mining Co.' 

Ranchers Exploration and Development Corp. 
UV Industries Inc."' — 

Toul 14 companies' production 

Total U.S. production 

Percent of total U.S. production by 14 

companies __. 

Total world copper production _ 

Percent of total world production by 14 
companies --. 



496.0 

284.2 

155.9 

116.0 

65.0 

78.5 

66.0 

(^) 

36.8 

86.2 

78.4 

1.9 

4.4 

14.2 

1,483.5 

1,544.6 

96.0 
6,547.3 



518,9 

313.5 

242.1 

114.6 

77.0 

76.3 

69.9 

(^) 

43.5 

86.3 

67.8 

1.9 

8.7 

13.8 

1,634.3 

1,719.7 

95.0 
6,993.7 



456.1 
281.2 
182.0 
103.6 
94.0 
67.7 
58.8 

39,4 

91.1 

58.4 

2.2 

11.6 

17.0 

1,463.1 

1,522.2 

96.1 
7,100.8 



460,6 

305,4 

233,5 

151.8 

137.0 

74.4 

65.8 

(•*) 

33.4 

113.9 

70.4 

1.9 

7,4 

14.9 

1,670.4 

1,664.8 

100.3 
7,758.8 



471.7 

319.6 

200.5 

160.0 

127.0 

76.2 

65.2 

32,1 

33.3 

119.6 

78.2 

.4 

9.4 

20.4 

1,713.6 

1,717.9 

99.8 
8,269.3 

20,7 



402.2 

281.3 

190.1 

151,6 

128,0 

83.2 

61.2 

22.7 

33.9 

108.5 

66.6 

,5 

11,1 

24,2 

1,565.1 

1,597.0 

98.0 
8,453.6 



288.1 

249.7 

149.6 

133,9 

134,0 

80.4 

55.8 

7.6 

76.7 

99.3 

70.8 

.5 

7.8 

17.6 

1.371,8 

1,413.4 

97.1 
8,099.9 



346.4 

331.0 

164.1 

150.7 

140.0 

94.4 

47.0 

47.8 

84.5 

98.7 

46.1 

14.5 

9.0 

23.1 

1,597.3 

1,605,6 

99.5 
8,670.9 



358.2 

276.7 

170.6 

154,5 

123.0 

73.6 

27.6 

59.7 

72.3 

83.0 

43.0 

18.4 

9.3 

21.5 

1,491.4 

1,504.0 

99.2 
8,796.8 

17,0 



318,2 

319.0 

142.8 

156.9 

118.0 

100.9 

39.7 

52.1 

90.8 

70.7 

40.7 

.6 

8.2 

5.4 

1,464.0 

PI, 490. 3 

98,2 
^8,524. 5 

17.2 



P Preliminary. 

' Includes Carborundum Co. acquired Dec. 31, 1977. 

^ Anaconda Co, acquired Jan. 12, 1977. All data prior to Jan. 12, 1977, cover Anaconda Co, only. 

' Bendix Corp. interest about 20 percent with limitation of 21 percent to Jan. 1, 1985. 

■* Owned by 2 Canadian companies (Hudson Bay Mining and Smelting Co., Ltd., and Minerals and Resources Corp. Ltd.), Mar. 30, 1979; Anglo American Corp. 

of South Africa Ltd. controls more than 40 percent of the outstanding common stock of both companies. Anaconda Co., unit of Atlantic Richfield, owns 93 percent 

of class A preferred stock. 

^ Standard Oil Co. of California interest 20.6 percent; and Selection Trust Ltd. (United Kingdom) interest 8.3 percent. 

^ Anamax Mining Co, was formed June 1973 through equal partnership with Anaconda Co., a unit of Atlantic Richfield Co. 

' Sept. 21, 1979, became a wholly owned subsidiary of Standard Oil Co. of Indiana. 

' Copper Range Co. acquired May 24, 1977. All data prior to this date cover Copper Range Co. only. 

' Lakeshore mine leases jointly terminated with El Paso Natural Gas Co, and property returned to Papago Iribe, October 1978. Noranda Exploration Inc, a U.S. 

subsidiary of Noranda Mines Ltd., (Canada), has entered into an agreement with the Papago Tribe to develop and operate the Lakeshore copper mine. 

'" Company in process of liquidation. Mar. 26, 1979. 

Sources; Bureau of Mines, based on analysis of annual reports and form lO-K data submitted to Securities and Exchange Commission; Non-Ferrous Metal Data, 
American Bureau of Metal Statistics, Inc.,; and annual data 1979, Copper Supply and Consumption, Copper Development Association Inc. 



thermore, the large expansion of production in 
less developed countries (LDC's) and the expro- 
priation and nationalization of copper produc- 
tion facilities by some of these LDC's has led to 
greater price competition in the both worldwide 
and U.S. copper markets. 

As stated previously, U.S. copper production 
has remained fairly level over the past decade. 
There are several major reasons for this stag- 
nation. One factor is that U.S. copper ore grades 
generally declined over the 1969-78 period. 
Also, production costs are generally lower for 
the major foreign copper producers (12). Fur- 
thermore, inflation in the United States has not 
only raised production costs but has also sharply 
increased the capital costs of opening new 
mines. To meet U.S. environmental standards, 
copper producers have had to divert funds that 
would have gone for exploration or capacity ex- 
pansion into outlays for pollution-control equip- 
ment (2, 33, 36-39). Last, but certainly not the 
least important, significant increases in energy 
costs resulting from OPEC actions and declining 



ore quality have added to production costs; cop- 
per mining and refining are very energy-inten- 
sive processes. 

OTHER IMPORTANT FACTORS 

In addition to the above reasons for stagnant 
copper production over the 1969-78 period, the 
U.S. copper mining industry has faced a set of 
additional factors that have affected its financial 
health. First of all, some foreign producers — 
now owned by their governments — respond to 
lower copper prices by maximizing copper pro- 
duction to earn needed foreign exchange and 
to maintain employment in their countries. This 
forces copper prices even lower than they nor- 
mally might have fallen. Another important fac- 
tor affecting the U.S. copper industry is the vol- 
atility of copper prices. This volatility is caused 
by several factors: 

• The sensitivity of copper use to the state of 
the economy. 



• The fact that production costs are lowest 
when operations are running at close to full 
capacity. This puts downward pressure on 
prices during recessions. 

• Inventory control problems, which stem 
from the difficulty in forecasting copper 
sales and from the desire to keep operations 
running at close to full capacity. 

• The fact that new mines and refineries are 
very large can lead to sharp price declines 
when the new supplies reach the market. 

Also, price controls in the early 1970's prob- 
ably kept copper producer earnings from being 
greater. In addition, the relative stagnation of 
the U.S. stock market during 1969-78 has prob- 
ably made it difficult to raise needed funds for 
sellng new stock, and, as a result, some firms 
have had to raise funds through long-term bor- 
rowing at high interest rates. 

There are several positive factors that help 
U.S. copper firms. Although some other metal 
producers are subject to the Federal price guide- 
lines of the Council on Wage and Price Stability, 
copper producers are now exempt because cop- 
per prices closely follow prices set on the New 
York Commodity Exchange (COMEX) and the 
London Metal Exchange (LME). Another posi- 
tive factor is the revenue from the sale of by- 
products. Byproducts of copper operations in- 
clude gold, silver, molybdenum, and sometimes 
platinum-group metals. Although the prices of 
these metals generally follow the trend of cop- 
per prices over the course of the business cycle, 
byproduct revenues can cut losses or improve 
profits significantly. For instance, in 1978, sales 
of byproducts of copper mining added about 



Table 2. — Percent of U.S. copper production 

by top producing companies in 1936 and 

1978 





rcrceiil ol tol.il L S. producMori 
ol toppc't 


Ckmipaiu 


Hl.Sli 


1978 


Keniieccui (Copper (iorp. ___ 

Phelps Dodf^e Corp. 

Anaconda Copper Cio. (now a unit of Allan- 
tic Richfield Co.) _ 


211. () 
17.4 

5.9 

('1 


21.:i 
21.4 

9 (i 


Columet and Hecla Corp. (now a unit of 


(') 




10 5 






Total - 


74.4 


'■()2 H 







*■' Estimated. 

' Not among the first 4 major producers. 

Sources: Bureau of Mines, based on analysis of annual reports and Imni 10-K 
data submitted to Securities and Exchange (Commission; Nori-Ferrous Metal 
Data. American Bureau of Metal Statistics. Inc. 



$100 million to Kennecott Corp/s total revenues 
(12). 

OUTLOOK 

The Bureau of Mines forecasts a significant 
increase in world and U.S. consumption and 
production of copper by the year 2000 (22-23). 
Domestic primary copper production is forecast 
to be 3.15 million short tons by the year 2000; 
this maintains approximately the same ratio of 
U.S. production to the total world production 
(forecast to be 19.5 million short tons in 2000) 
as in 1978. (See figure 1 and table 3.) In order 
to reach projected production, U.S. producers 
(and particularly the 14 largest companies) must 
more than double their 1978 production capac- 
ities. However, analysis of the producers' com- 
mitments for capital outlay and future plans (as 
reported in the annual 10-K reports to the Se- 
curities and Exchange Commission (SEC^)) and 
information from responsible officials in the 
private sector do not yet indicate any thrust for 
doubling the 1978 production by the year 2000. 
Because of the long time period necessary for 
exploration and the opening of new mines and 
processing plants, U.S. firms would soon need 
to be starting plans to expand capacity. 

The alternative to the opening of new mines 
and refining plants is the expansion of present 
capacity by applying technological innovations. 
Major technological innovations in mining have 
occurred during the past 30 years. Examples are 
increasing truck capacity from 25 tons to 150-200 
tons and using mining equipment that nearly 
tripled worker productivity. However, this will 
be difficult to match during the next 20 years. 
During 1977, some 33,200 copper miners were 
employed in producing nearly 1,500,000 short 
tons of copper. By 2000, producers may face a 
labor shortage, since barring major advances in 
technology, 30,000 additional miners would be 
needed to meet projected production (16—17). 
Based on analysis of quarterly and annual re- 
ports of copper-producing companies, the cur- 
rent major thrust of capital outlays to meet man- 
datory societal expenses leaves a small balance 
of funds available for technological innovation 
to increase productivity. As a result, a review 
may be necessary to assess the differences be- 
tween private commitment of funds and Cov- 
ernment forecasts so that consideration may be 






1969 



1978 



2000 (forecast) 



Figure 1. Comparison of U.S. copper mining production with rest-of-world production in 1969, 
1978, and 2000 (forecast). 

Sources: Non-Ferrous Metal Data, American Bureau of Metal Statistics, Inc.; annual data 1979, 
Copper Study and Consumption; Copper Development Association Inc. 



given to policies that would sustain the U.S. cop- 
per industry's competitive position. 

NATIONAL SECURITY ASPECTS 

Copper has and will continue to be indispen- 
sable to U.S. national security (40). In 1941, cop- 
per was included as a strategic material in order 

Table 3. — Primary copper production, 1978 
and 2000 (forecast) 





1978 


2(MHI 




Thousand 
short tons 


Percent 


riioiisand 
short tons 


Percent 




'1,464.(1 
' 2ti.:! 


17.2 
.3 


3,(193 ' 
^57 


15 9 


Other U.S. companies 


.3 


Tola! Uniled Stales 

Rest of the world .- 


1.4911.:) 
7.(134.2 


17.5 
82.5 


3,15(1 ■ 
Hi, 35(1 


l(i.2 

83.8 


World total 


8,524.5 


1(1(1.(1 


19,5(1(1 


1(1(1 (1 







' Preliminary. 

''Bureau of Mines Mineral Commodiiv Profiles, 1979. 

.Source: Bureau of Mines, based on analysis of annual data 1979, from (ittpper 
Development Association Inc. 



to control inventories of materials under the 
provisions of the Strategic Materials Act of 1939 
(52). It was classified as a "critical material" and 
became subject to allocation and conservation 
during World War II. Later copper was in- 
cluded again after the enactment of the Strategic 
and Critical Materials Stock Piling Act of 1946. 
{30). The initial copper stockpile objective was 
in excess of 1 million short tons. By August 1973 
this objective had been reduced to zero. On May 
2, 1980, the Federal Emergency Management 
Agency set the current stockpile goal at 1 million 
tons of refined copper (31). 

Copper has been subject to Federal Govern- 
ment assistance to stimulate production. During 
the Korean conflict, the Defense Production Act 
of 195p provided the mechanism for favorable 
loans, purchase contracts, floor prices, and ac- 
celerated depreciation guidelines for Federal 
taxation purposes (24). 



FINANCIAL ECONOMIC ANALYSIS AND ASSESSMENT— 14 LARGEST 

U.S. COPPER PRODUCERS 



There are many kinds of quantitative meas- 
ures of the financial health of a company and 
its success in operations. Company profitability 
is the choice for this study because of its impact 
on the generation of capital, both internally (re- 
tained earnings plus nonfund items) and exter- 
nally (public offerings of stock and bonds and 
special money market borrowing). One set of 
widely accepted measures of profitability is the 
rate of return on average shareholders' equity 
and on average total invested capital. Tables 4 
and 5 show these rates of return over the 
1969—78 period for the 14 major copper pro- 
ducers, and figure 2 compares the average re- 
turn on equity of these firms to the return on 
equity of all U.S. manufacturing firms. 

DEFINITIONS AND QUANTITATIVE 
PERFORMANCE MEASUREMENTS 

There are many factors that contribute to the 
profitability of the copper industry, many of 
which are subject to quantitative and qualitative 
analysis. For example, companies have various 
accounting options, including the capitalization 
of financial costs during mine development, the 
treatment of revenues from coproducts or by- 
products of copper, and the method of report- 
ing returns from overseas joint ventures (5). 
Treatment of foreign exchange gains and losses 
is also a complicating factor (8). Although the 
impact of these and many other variations in 



accounting methods are reflected in the prof- 
itability of the various copper companies, long- 
term trends in the profitability of U.S. copper 
companies have not been distorted. As a result, 
no attempt has been made to adjust reported 
earnings for differences in accounting proce- 
dures. 

Two classic measures of return on investment 
have been employed in this analysis — the rates 
of return on both average shareholders' equity 
and average total invested capital. Averages on 
shareholders' equity and total invested capital 
were utilized to avoid the extreme rate variance 
that is due to very large profits or losses in any 
one year. The definitions of the terms used in 
this investigation are as follows: 

Net income or earnings (P) — Company profits 
after taxes, after extraordinary charges or cred- 
its, and available to shareholders. 

Interest cost (I,) — Interest and financing 
charges on long-term indebtedness (bonds, de- 
bentures, etc.). 

Shareholders' equity (E) — Common stock plus 
surplus (retained earnings), surplus reserves, 
unamortized debt premium, capital stock pre- 
mium, less treasury stock plus convertible pre-' 
ferred stock; E, — beginning of year; E^ — end of 
year. 

Total invested capital (V) — Long-term debt 
plus preferred stock and shareholders' equity 
(E); V| — beginning of year, V.^ — end of year. 



Table 4. — Fourteen leading U.S. copper producers, return on shareholders' equity, 1969—78' 



(I'tTccnt) 



CA)mpanies 



HIIW 



1970 



1971 



1972 



I97;i 



1974 



1975 



1976 



1977 



1978 



Kennecoll Chopper Corp. 

Phelps Dodge Corp. 

Atlanlic Richfield Co 

Newinonl Mining C^orp. 

Pennzoil C^o. -- - 

ASARCO Inc 

Inspiration Consolidated Copper Co. 

Amax Inc. - 

Cities Service Co. 

Cyprus Mines Corp. 

Louisiana Land and Exploration Co. -. 

Hecia Mining Co. 

Ranchers Exploration and Development (^orp. 
UV Industries Inc. _- 



I5.fi2 
1.5.73 
8.88 
18.18 
l(j.2.') 
16.41 
25.21 
15.27 
10.71 
18.16 
17.22 
12.37 
11.48 
23.96 



13.28 
17.9(> 

5.72 
19.05 
15.78 
15.60 
28.98 
11.69 

9,10 
16.88 

9.23 
1 1 .25 
16.00 

5.73 



7.26 
11.04 
(34.7(1) 
11.75 
7.12 
5.45 
12.73 
7.85 
7.75 
13.74 
(5.33) 
7.93 
9,10 
4,20 



3.99 
11.26 
14.60 
9.29 
12.119 
6.89 
16.41 
9.77 
8.00 
13.01 
(7.06) 
5,13 
8,41 
9.31 



12,72 
13.93 

8.(>4 
19.60 
14.82 
15.46 
17.60 
14.21 

9.91 

15.41 

(10.56) 

8.14 

5.80 
15.50 



15.32 
14.25 
21.40 
18.90 
19.20 
1 5.36 
10.57 
15.95 
12.72 
16.84 
15.94 
14.46 
17.28 
19.23 



1.52 

5.19 
(3.21) 

8.22 
19.70 

2.99 
(3.79) 
11.59 

8.17 

3.50 
(12.17) 

9.09 
13.87 
13.91 



0.62 

4.60 

1.37 

7.50 

27.43 

5.00 

.11 

10.24 

12.03 

3.65 

(2.31) 

(8.29) 

5.28 

17.43 



0.52 

2.02 

15.51 

.79 

16.93 

(3.54) 

(10.38) 

4.20 

10.74 

(3.56) 

22.14 

(24.21) 

7.55 

16.91 



0.36 
3.41 

15.37 
5.41 

20.07 
5.67 

(7.97) 
8.88 
6.03 

16.33 

19.2] 
(8.931.73) 

17.39 

16.37 



All 14 companies'^ 



13.97 



11.77 



1.76 



8.98 



12.92 



16.19 



..39 



7.35 



9.85 



9.74 



' Return on equity is defined as ratio of net income (after taxes) to average shareholders" iiiveslinent. 
'^ Weighted average. 

Note: Amount in parentheses indicates minus. 

Source: Bureau of Mines, based on anahsis of annual reports and htrin 10-K data submitted to Securities and Exchange Commission. 



10 



Table 5. — Fourteen leading U.S. copper producers, return on invested capital, 1969-78' 



(IVrceiu) 



Companies 



I96;i 



H)7(l 



1971 



197:! 



1974 



1975 



197ti 



1977 



1978 



Kennecoll Copper Corp. 
Phelps Dodge Corp. 



Atlantic Rithfield Co. 

Newtnont Mining Co. 

Pennzoil Co. - 

ASARCO Int. 

Inspiration Consolidated Copper Cio. 

Amax Inc. 

Cities Service Co. — 

Cyprus Mines Corp, 

Louisiana Land and Exploration Co. 

Hecia Mining Co. 

Ranchers Exploration and Development Corp. 
UV Industries Inc. 



H.7-) 
15.13 

HAH 
17.68 

9,82 
15,(i8 
24,t)5 
11,22 

4,78 
15,95 
14,62 
12.37 
H).92 
12.71 



1,3.1)5 
16.82 

5.88 
16.58 
10.23 
15.24 
28.38 

8.87 

8.41 
16.08 

8.76 
1 1 .25 
13,19 

4,81 



7,71 
10,40 
(23.49) 
9.54 
6. 78 
5.46 
12.51 
6.12 
7.87 
13.50 
(2.32) 
7,93 
10,14 
5.24 



12 12 

12.30 
8.66 

16.32 
9,83 

15,11 

12.44 
9.40 
9.27 

15.58 
9.84 
6.81 
6.09 

10,98 



14.41 
12.61 
I9..52 
16.10 
1 1 .02 
14.87 
9.12 
10.53 
11.74 
17,24 
14,08 
1 1 .35 
17,43 
13,55 



3.23 
6.36 
(.50) 
8.37 

10.15 
4.38 

(1.25) 
9.03 
K,25 
4.90 

(7,74) 
6,25 

I4,3ti 

11.13 



2.90 
6.01 
3,65 
7,46 

14,34 
6,19 
111 
8.34 

11.78 

4.06 

.04 

(2.21) 
6,63 

13.57 



All 14 companies'^ 



12.05 



10,4(i 



3.01 



11.12 



13.68 



.97 



7,54 



2,76 
4.59 

13.21 
2.95 

10,58 

(7.09) 
5,lil 
10,47 
(1,15) 
19.47 
8.57 
8.56 
13.48 



'1.78 



3.54 
5.59 
4.93 
6.72 
3.27 
7.05 
5.02) 
9.81 
6.83 
3.57 
7.15 
5.99) 
8.33 
2.66 



10.22 



a\cl,im' lul.il i,i|)iuil, 1 ol.il i.ipilal is (U'fincd ,is llu' Mini (il sli.irchulilcrs' ei|uilv 



' Return on capital is defined as ratio ol net income (alter taxes) plus interest i 
and subordinated borrowings. 
If Weighted average. 

Note: Amount in parentheses indicates minus. 

Source: Bureau of Mines, based on analvsis ttt annual reports and lO-K data subinitied itt Seturiiies and Kxtlianjfe (.(niiinission. 



Rate of return (R,) — Average shareholders' 
equity. 

Rate of return (R.^) — Average total invested 
capital. 



R. = 



2P 



= Return on (1) 



E, + E, E, + E., average 

2 share- 

holder's 
equity 

R., = P + I| = 2(P + I|) = Return on (2) 
Vi + V, V, + V,, average 
2 total in- 

vested 
capital 

Equation 1 , often referred to as the financial 
ratio, measures the earning power of the cor- 
poration from the proprietary (equity) point of 
view. Equation 2, which provides an indication 
of the economic productivity of capital, is a cri- 
terion of the earning power of the corporation 
(operating efficiency from the standpoint of the 
suppliers of both borrowed and equity capital). 

FINANCIAL ASSESSMENT OF 14 
LARGEST U.S. COPPER COMPANIES 

The rates of return of the copper companies 
(tables 4 and 5) indicate a general deterioration 
in industry profitability since 1969. The excep- 
tion to this trend is noted for copper concerns 
that have merged with oil companies and where 
copper has been replaced as the principal line 



of business. The actual copper unit results are 
masked by the performance of the oil segment 
of the corporate structure. 

From 1969 to 1976, just before several large 
copper producers merged with oil companies, 
the shareholders' equity of the 14 copper com- 
panies increased by less than 50 percent, which 
indicates the lean profitability and low internal 
cash fiow. Concurrently, the indebtedness of 
these selected companies increased nearly 130 
percent, or more than 25/4 times the increase for 
shareholders' equity. Several previously debt- 
free copper companies borrowed heavily during 
the 1968-79 period. This is partly indicated by 
the fact that the long-term debt of these firms 
increased over twice as fast as shareholders' 
equity. Table 6 lists the ratios of long-term debt 
to equity for the 14 companies. Although such 
data must be interpreted carefully because of 
the different ability of each firm to carry long- 
term debt, the weaker financial health of the 
U.S. copper industry was generally refiected in 
higher long-term debt-equity ratios. 

By 1977, the deteriorated financial position 
of several companies made them attractive ac- 
quisition targets. Despite the sagging profits 
other resource-based companies, especially ma- 
jor oil firms, saw a future potential in financially 
troubled copper resource companies. Anaconda 
was acquired by Atlantic Richfield, and Copper 
Range was bought out by Louisiana Land and 
Exploration. On the other hand, Kennecott, 
which was forced to sell its Peabody Coal Co. 
subsidiary by Federal Government order, di- 



11 



Table 6. — Fourteen leading U.S. copper producers, long-term debt-equity ratios, 1969—78 



Companies 



1970 



1972 



1974 



1975 



1977 



1978 



Kennecott Copper Corp. 

Phelps Dodge Corp. — 

Atlantic Richfield Co 

Newmont Mining Corp. 

Pennzoil Co. 

ASARCO Inc. .— 

Inspiration Consolidated Copper Co _-. 

Amax Inc. 

Cities Service Co. - --. 

Cyprus Mines Corp. 

Louisiana Land and Exploration Co. 

Hecia Mining Co — 

Ranchers Exploration and Development Corp. 
UV Industries Inc. 



17 

. 12 

25 

11 

137 
3 
2 
33 
34 
30 
27 

NA 
34 

118 



15 
13 
30 
24 

138 
3 
I 
38 
31 
21 
22 

NA 
52 

114 



26 
23 
46 
42 

121 
5 
1 
56 
42 
14 
35 

NA 
21 

169 



22 
24 

28 
45 

137 
7 
24 
63 
40 
8 
3(j 
18 
18 

129 



16 
34 
24 
38 

103 
11 
56 
50 
38 
6 
31 
20 
17 

115 



15 
36 

21 
32 
188 
13 
50 
41 
32 
3 
27 
32 
14 
95 



28 

58 
27 
38 
178 
40 
35 
39 
43 
35 
29 
56 
III 
79 



38 
62 
30 
44 
143 
46 
30 
40 
37 
67 
27 
73 
15 



36 
62 
54 
51 

142 
48 
28 
41 
41 
76 
25 

100 
12 
90 



44 
74 
47 
47 
117 
36 
24 
33 
48 
66 
23 
(107) 
14 
72 



NA Not available. 

Note: Amount in parentheses indicates minus. 

Source; Company annual reports. 



versified by purchasing Carborundum Co., a 
manufacturer of abrasives. 

A brief comparison of tables 4 and 5 shows 
that the rate of return on shareholders' equity 
was sometimes above the rate of return on in- 
vested capital. This indicates that some of the 
firms have been able to increase their return on 
equity through financial leverage, that is, through 
the use of fixed-interest-rate debt. Interest on 
such debt is a tax-deductible expense, and cap- 
ital managers can find that leverage is a good 
way of raising the return on equity. However, 
this financial leverage became a disadvantage to 
some firms when the cost of additional debt in- 
creased with the long-term debt-equity ratio. 
Also, such a practice can be risky. If a substantial 
downtrend in sales occurs, earnings decline 
more rapidly, and it may become impossible for 
a firm to meet its debt service obligations. 

Figure 2, which compares the rates of return 
on shareholders' equity of the 14 U.S. copper 
mining firms with the average rate of return on 
shareholders' equity of U.S. manufacturing firms, 
also depicts deteriorated financial health of the 
U.S. copper industry. For the 1 0-year period 
1969—78, the 14 U.S. copper mining companies 
earned an average of 9.8 percent on equity com- 
pared to the average 13.4 percent earned by 
U.S. manufacturing. This is significant because 
copper mining is riskier than manufacturing. It 
is subject to geologic uncertainty, long lead times 
in development that tie up large amounts of cap- 
ital, the vulnerability of the mining industry to 
political decisions, and the greater volatility of 
copper prices (and hence, earnings). These fac- 
tors normally dictate the copper mining yield a 
greater rate of return on shareholders' equity 



than generally less risky manufacturing ven- 
tures. For 1979, the rates of return on equity 
for the U.S. copper companies probably in- 
creased significantly because of higher demand 
and prices for copper and sharply higher prices 
for byproducts and coproducts such as silver, 
gold, and molybdenum (9, 13). 

ENVIRONMENTAL POLICY AND ITS 
IMPACT 

The profitability and financial health of the 
U.S. copper industry has been significantly af- 
fected by public policy actions on environmental 
quality (33). The four steps of copper produc- 
tion — mining, milling, smelting, and refining — 
are all affected by Federal environmental reg- 
ulations. Beginning in 1973, domestic copper 
producers have directed a significant portion of 
their yearly capital outlays to environmental 
quality controls such as water and air pollution 
abatement and land use. These legally man- 
dated capital expenditures, plus the greater un- 
certainties that are unique to the minerals in- 
dustry, make the risk of investment much higher 
than for many other enterprises. Because such 
elements place considerable constraints on po- 
tential investment returns, they discourage in- 
vestment flows and decrease the copper com- 
pany's ability to tap the market for capital funds 
to update and expand plant and equipment. 

Table 7 lists capital expenditures of the 14 
leading U.S. copper producers for 1969-78. 
From 1972 to 1976 (just prior to the merger of 
Anaconda Co. and Copper Range Co. with oil 
companies), capital spending nearly doubled to 
about $2 billion. A large part of this increase 



12 



18 



16 



14 



^12 

0) 

o 

0) 

a 

flC 

:d 
\- 

lU 

DC 8 
u. 

o 

UJ 



U.S. manufacturing 




1 0-year average, 
percent 



Manufacturing 
Copper mining 



13.4 
9.8 



1969 70 71 72 73 74 75 76 77 78 

Figure 2. Comparison of estimated rates of 
return on shareholders' equity, 
1969-78. 

Sources: First National Bank (New York), 
Monthly Economic Letter and Bu- 
reau of Mines analysis, table 4. 



was due to the mandated environmental regu- 
lations. During this period, inflation also took 
its toll through increased prices for capital 
equipment necessary to assure the continuing 
efficiency of the mines. Expenditures for pol- 
lution control equipment were generally fi- 
nanced through borrowing, thus increasing the 
long-term debt of companies and raising their 
debt-equity ratios. 

Of all the Federal antipollution regulations, 
the ones limiting pollutant discharges from cop- 
per smelters have had the greatest impact on 
capital expenditures and thus on production 
costs. Although the U.S. Environmental Protec- 
tion Agency (EPA) has issued new proposed 
rules for nonferrous smelter operations (35), the 
implementation is predicated upon the financial 
health of the copper companies. 

CORPORATE TAXATION AND IIS 
IMPACT 

U.S. copper companies are subject to Federal, 
State, and local taxes just as are other businesses. 
These taxes have an effect on the firms' total 
operations, from current profitability to poten- 
tial profitability of new investments (34). 

Federal tax liabilities are generally the largest 
of all taxes. Although the primary purpose of 
these taxes is to pay for Federal programs, var- 
ious revisions to tax laws over the years have 
been used to solve or ameliorate social, political, 
and economic problems. For instance, a variety 
of business deductions and tax credits have been 
instituted to spur economic activity. There are 
a number of tax benefits that help the copper 
industry, including depreciation, depletion al- 
lowances, and investment tax credits. 



Table 7. — Fourteen leading U.S. copper producers, capital expenditures, 1969—78 



(Million <i(>ll.iis 



CA)mpaiiies 



196;i 



1971) 



1971 



1972 



197S 



1974 



1975 



197(i 



1977 



1978 



Kennecou Copper Corp. -__ 

Phelps Dodge Corp 

AtUniic Richfield C:o. 

Newmont Mining Corp 

Pennzoil Co, 

ASARCO Inc 

Inspiration Consolidated Copper Co. 

Amax Inc. — 

Cities Service Co -- -- 

Cyprus Mines Corp. 

Louisiana Land and Exploration Co. 

Hecia Mining Co - 

Ranchers Exploration and Development Corp. 
UV Industries Inc. 



42. :f 

11)1.8 

127.1) 

57.0 

270.0 

25.1 

9.4 

139.0 

242.8 

89.5 

12.1 

4.5 

1.8 

8.9 



Total 14 companies -- - 1.131.2 



48.2 

94.1 

97.0 

1353 

151.0 

72.2 

9.7 

169.0 

285.1 

35.0 

14(1 

7.9 

10.7 

7.9 



5(i,:i 

90.2 

95.1 

129.1 

89.0 

55,4 

9.8 

130.0 

29(j.5 

43.3 

11,9 

11,8 

5,1 

15,2 



3«j,li 
107,2 
12(i,5 

44,1 
112,0 

K(i,7 

27,8 
148,0 
261,7 

28,5 
4,1 

17,9 
,9 

20.4 



63.(i 

194.2 

113.5 

47.6 

251.0 

96.7 

40.8 

256.0 

402.2 

43.3 

5.5 

1.7 

1.9 

22,7 



96.1 
29(v4 
193.9 

55,8 
237, 1 
137,7 

18,8 
408,0 
446,8 

74,9 
7,5 

28.5 
1.6 

22.6 



134.6 
225.6 
128.7 

53.2 
217.4 
167 5 
2.8 
550.0 
439.4 
107.2 

10.5 

28.3 
1.0 

21.9 



136,1 

149,3 

50,0 

53,9 

247,3 

76,0 

2,1 

532.0 

524.3 

153.6 

3.1 

8.5 

3.3 

19.6 



139.2 

117.6 

1,681 3 

48.2 

264.0 

95.9 

3,3 

409.0 

501.1 

124.7 

147.3 

1.6 

1.4 

23.9 



1,137.1 



1,038.7 



1,540.7 



2,025.8 2,088.1 



3,588.2 



161.7 

105.9 

1,358.2 

58.3 

344.0 

79.4 

8.2 

403.0 

6372 

49.1 

191.7 

1.2 

9.2 

23.6 



3.430.7 



Source: Bureau of Mines, based on analysis of annual reports and form 10-K data subinitted to Securities and Exchange Commission. 



13 



Table 8. — Fourteen leading U.S. copper producers, effective income tax rates, 1969—78 



(Percent) 



Companies 



1969 



1970 



197! 



1972 



1973 



1974 



1975 



1976 



1977 



1978 



Kennecou Copper Corp. 

Phelps Dodge Corp. --- 

Atlantic Richfield Co. -- 

Newmont Mining Corp. --- 

Pennzoil Co. --- 

ASARCO Inc -- --- 

Inspiration Consolidated Copper Co. 

Amax Inc. 

Cities Service Co. _- -. 

Cyprus Mines Corp. 

Louisiana Land and Exploration Cio. 

Hecla Mining Co. 

Ranchers Exploration and Development C.nrp. 
UV Industries Inc 



28.1 
32.8 
46.3 
33.2 
('1 
21,4 
29,7 
13„5 
25.5 
36.9 
18.9 
31.5- 
5.4 
49,9 



24.2 
37.2 
10.6 
31.5 
6.1 
22.2 
33.2 
25.1 
27,8 
34,7 
29,4 
31.6' 
29.8 
15.6 



4.2 

33.8 

(') 

19.8 

2.2 
10.0 
27.8 
18.8 
14.3 
30.7 
(42.4) 
30.6' 
15.5 
45,5 



12.8 
33.1 
111 
26.6 
17.3 
16.2 
27.4 
23.6 
17.9 
21.6 
(40,8) 
18,0 
7,1 
46.3 



25.0 
37.3 
24.3 
27.9 
13.8 
16.9 
4.2 
26.5 
28.9 
30.2 
37.2 
27.0 
23.1 
44.5 



27.2 
26.5 
33.8 
28.5 
21.7 
21.4 
14.3 
27.1 
30.4 
35.9 
28.0 
33.0 
25.6 
47,0 



(74.5) 
(29.8) 
(') 
29.6 
25.4 
(65.6) 
(23.5) 
15.8 
41.9 
23.9 
(36.0) 
37.0 
32,0 
45,0 



(74,7) 

9,1 

28,0 

30,7 

30.0 

21.9 

(168.1) 

4.2 

43.9 

(4.7) 

(47,9) 

(47.0) 

41.7 

42.0 



(136.7) 
21.5 
27.6 

(186.2) 
32.0 
22.6 
(8.9) 
3.9 
44.9 

(148.6) 
44.4 
(20.0) 
34.9 
46.4 



62.7 
16.9 
42.5 
34.2 
33.5 
31.1 
(') 
21.1 
42.8 
19.6 
44.6 
(5.0) 
30.9 
43.1 



*■ Estimated. 

' Loss for the period or tax loss carry forward position. 

Note: Amount in parentheses indicates minus (loss). 

Source: Bureau of Mines, based on analvsis ol aiuuial reports and lorm 10-K data submitted to Securities and Exchange (iommission. 



The 14 U.S. copper companies have utilized 
tax benefits in different ways so that they have 
different effective income tax rates. Table 8 lists 
these effective tax rates, which were affected by 
the following: 

a. Percentage depletion in excess of cost 
depletion; 

b. Foreign and other income subject to 
lower tax rates; 
Investment tax credits; 
State and local income tax; 
Tax on undistributed earnings; 
Excess of intangible development costs 
deducted; 

g. Tax loss carry forward benefits; 

h. Minimum tax; and 

i. Others. 
These effective tax rates are the ones that the 
copper companies use for operational planning, 
for investment decisions, and for determining 
whether to finance investments through debt or 
equity. On the other hand, tax benefits are dis- 



c. 
d. 
e. 
f. 



counted by credit institutions and investment 
analysts when judging management's capability, 
the firm's credit rating, its ability to attract cap- 
ital, and the cost of capital. 

Tax policies can be an incentive or a disin- 
centive to investment. The inflationary economy 
of the past 10 to 15 years has resulted in inflated 
profits, primarily because depreciation of plant 
and equipment is based on historical costs and 
not inflated replacement costs. This overstates 
profits, and thus higher effective taxes are being 
paid. As a result, cash flows in real terms are 
lower than they would have been in a noninfla- 
tionary economy, and new investments and ex- 
ploration, research, and development are hurt. 
One modification to the tax structure currently 
being prepared in Congress would help all busi- 
ness, including copper companies, by allowing 
faster depreciation of plant and equipment. If 
passed into law this would decrease effective tax 
rates and thus increase the profitability of po- 
tential investments. 



HB 



14 



DYNAMICS OF CORPORATE STRUCTURE AND BEHAVIOR 



Like most U.S. enterprises, copper producers 
generally started as small companies, many as 
groups of miners. In the early periods, the in- 
dustry was extremely labor intensive. As de- 
mand for copper increased, competition within 
the industry developed and prompted the ap- 
plication of more efficient and economical meth- 
ods of mining to reduce costs and thus increase 
profits. The exhaustion of more accessible and 
richer deposits necessitated mining of ore lower 
in copper content and lying at greater depth. 
This stimulated technological advancement not 
only in mining methods but also in increased 
use of power equipment, in improvements of 
drilling, loading, and hauling equipment, and 
in metallurgical technology. This required huge 
capital expenditures, which small producers 
could not afford. Because nearly all improve- 
ments in mining methods and technological ad- 
vancements led to greater economies of scale, 
the U.S. copper industry is mainly composed of 
large, integrated producers that in some cases 
are part of multiproduct, multinational orga- 
nizations and joint ventures. The 1969-78 pe- 
riod witnessed further alterations of corporate 
structure and behavior — notably in the areas of 
diversification, interconnections among firms, 
copper investment strategy, and financing tech- 
niques. 

DIVERSIFICATION AND MERGER 
During the 1960's, radical changes were being 



initiated in the corporate structure and behavior 
of business (7). It was common practice for com- 
panies to become involved in conglomerates via 
mergers or other methods of diversification. 
The copper industry was no exception to this 
trend. During the 1960's, two significant copper , 
producers were involved in mergers. Cities Serv- 
ice Co. acquired the Tennessee Corp. in June 
1963 and Pennzoil Co. acquired control of Duval 
Corp. in August 1968. The main purpose of 
these mergers was probably to diversify revenue 
sources (see table 9), making copper a smaller 
source of total revenues. During this period, the 
copper companies were generally healthy with 
few debts and acceptable credit ratings, despite 
major expropriation losses on foreign invest- 
ments during the latter 1960's and early 1970's. 

Beginning in the mid-1970's, the copper in- 
dustry encountered difficult times because of 
mandated expenses for environmental, safety, 
and health regulations (air pollution, water pol- 
lution, and solid wastes); steadily rising fuel 
costs; excess capacity; and lower copper prices. 
All of the above factors contributed to sagging 
profits or losses. It was necessary for previously 
debt-free copper companies to incur debt to fi-^ 
nance the costs of required environmental con- 
trols. This in turn created a much higher debt- 
equity ratio, which forced credit-rating institu- 
tions to downgrade the ratings for indebtedness. 
These lower credit ratings made it difficult to 
borrow further needed funds. 



Table 9. — Fourteen leading U.S. copper producers, shift in corporate business composition, 

1969-78 

(Percent oT (-npijer and tnppci [jrndiKl s.iles [n liil.il levetuics) 



Companies 



i ')ti9 



l')7() 



hl7l 



1 972 



I(l7:i 



1974 



I97j 



1977 



1978 



Kenneeotl Copper (^orp — 

Phelps Dodge Corp. 

Allanlk Rithfield Co.' 

Newmonl Mining (iorp. .-_ 

Pennzoil Co. -. 

ASARCO Inc 

Inspiraiion Consolidated Copper Co. -. 

Aniax Int,^ 

Cities Service Co 

Cyprus Mines (^orp. _-. 

Lt)uisiana I^nd and Exploration Co 

Hecia Mining (>), 

Ranchers Exploration and Development Corp. 
UV Industries Inc. 



77.9 
NA 
HD.Ii 
7:t.2 

22.:i 

Sti.li 
«ti.7 

NA 

6.1 
33.2 
99.0 

5.H 
«4.2 

NA 



7«.3 
NA 
74.4 
(i7.4 
24,9 
3,"). 9 
S7.2 
21.0 

e.i 

37.4 
9H.4 

7.3 
92.4 

NA 



HO. 3 
NA 
70.0 
fi4.l 
33.0 
32.2 
S."i.9 
13.0 
5.5 
35.3 
9H.6 
7.2 
H9.4 
40.0 



77.1 
NA 
69.3 
71.3 
32..". 
32.4 
«(>.4 
19.0 
5.9 
35.7 
97.7 
(i.2 
HI. 4 
41.0 



7H.0 
NA 
7 1 .5 
(i9.2 
2H.7 
30.4 
H5.2 
17.0 

(i.li 
34. N 
9H.I 

1,0 
91.5 
42-0 



74.5 
NA 
(i9.5 
59.S 
23. (> 
2l.(i 
84. 5 
17.0 

4.8 
30.6 
98.3 

1.0 
93.4 
47.0 



Ii3. 1 
NA 
57.5 
42.7 
20.0 
10.7 
70.0 
11.0 
4.4 
27.5 
97.4 
.9 
83.1 
33.0 



72.5 
98.6 

47.8 
18.7 
24.1 
68.8 
15.0 
5.5 
27.8 
96.5 
38.5 
74.1 
37.0 



65.7 
96.7 

6.4 
43.2 
20.7 
20.5 
63.4 
14.0 

4.1 
25.9 
17.7 
45.4 
56.1 
38.0 



38.5 
96.0 

5.3 
43.8 
22.0 
26.4 
.56.0 
16.0 

5.1 
29.2 
20.1 

6.6 
25.3 
36.0 



NA Not available, 

' Anaconda Co, acquired Jan. 12, 1977. All data prior to Jan. 12. 1977, cover Anaconda (>». only. 

' Anamax Mining Co. was formed June 1973 through equal partnership with Anaconda Co., a unit of Atlantic Richfield Co. 

' Copper Range Co. acquired May 24. 1977. All data prior to this date cover Copper Range Co. only. 

Source: Bureau of Mines, based on analysis of annual reports and form lO-K data submitted to Securities and Exchange Commission. 



15 



The weakened financial position of some cop- 
per firms led to several acquisitions in the post- 
1976 period by oil companies. Anaconda was 
acquired by Atlantic Richfield in January 1977, 
and Copper Range was merged into Louisiana 
Land and Exploration Co. in May 1977. Fur- 
thermore, Standard Oil of Indiana acquired 
Cyprus Mines in April 1979. Apparently, some 
oil firms saw potential long-term value despite 
the financial trouble of the copper companies, 
and viewed copper mining as a logical extension 
of their present resource extraction business. 
Also, the purchase prices of several of the ac- 
quired firms — Anaconda and Copper Range — 
were roughly half of the book values of the firm. 

Other oil companies also apparently believe 
that the minerals industry — and copper in par- 
ticular — offers a good potential for profit (tables 
10 and 11). One firm. Inspiration Consolidated 
Copper Co., is controlled by two related Cana- 
dian firms — Hudson Bay Mining and Smelting 
Co., Ltd., and Minerals and Resources Corp., 
Ltd. — which have substantial oil and gas inter- 
ests. Standard Oil of California owns a 20.6-per- 
cent interest in Amax, the diversified minerals 
producer, and unsuccessfully attempted to take 
Amax over. On the other hand, Exxon has cho- 
sen to start up its own copper company; it has 
purchased a mine in Chile and has been eval- 
uating a plan for opening a copper mine in 
Wisconsin. Still others — Cetty Oil Co. and Oc- 



cidental Petroleum Corp. — own undeveloped 
copper properties in Arizona. 

Other nonoil companies have also shown an 
interest in nonrenewable resources, including 
copper. General Electric Co., through its Utah 
International subsidiary, has taken a position in 
Australian copper mining. Bendix Corp., a di- 
versified manufacturer, has purchased a 20-per- 
cent interest in ASARCO, one of the 14 major 
U.S. copper producing firms. 

Of the remaining copper majors, Kennecott 
and Phelps Dodge have chosen to diversify in 
different ways. Kennecott, which attempted an 
earlier diversification through its purchase of 
Peabody Coal, was forced to sell off this segment 
of its business for antitrust reasons. With the 
resulting spare cash, it then purchased Carbo- 
rundum Co.— a manufacturer of abrasives — in 
order to reduce the firm's sensitivity to swings 
in the price of copper. Since the late 1977 ac- 
quisition, the portion of copper sales to total 
revenues fell to roughly 40 percent from about 
66 percent. Phelps Dodge, although it has en- 
tered the uranium and aluminum business, still 
derived 96 percent of its sales from copper in 
1978. 

INTERCONNECTIONS AMONG COPPER 
FIRMS 

Another change that has apparently taken 
place in the U.S. copper industry is the move 



Table 10. — Industry 


affiliation of selected copper producing groups in 


1978 






(!onIrolliMg coiii|).uiv 


1978 coppet 

production, 

1, 01)0 short 

tons 


I'eicent ol 

induslr\ 

total 


!iHliistr\ altlliation. percent of total 
tiuliistrv 1978 production 


Copper-producing groups subsidiary 
or division 


Copper 


Petroleum 


Other 
minerals 




Kennecott C'.opper Corp. 

Hhelps Dodge (-orp. 

Atlantic RichlleUI i.o. 


:!1H.2 
:il9.0 
I42.H 
1.56.9 
IIH.II 
1011.9 

39.7 
52.1 
90.8 
70.7 
40.7 
.6 

S.2 
5.4 


2 1 .:! 

21.4 
9.6 

10.5 
7.9 
6.8 

2.7 
3.5 
6.1 
4.7 
2.7 
Insig. 

.6 
.4 


21.3 
21.4 

10.5 


9.li 
7,9 

2.7 

6.1 

4.7 
2.7 

.4 




Phelps Dodge mines 




Magma Copper Co. and divisions 

Duval and Duval Sierrita Corps. 

ASARCO Mines 


Newinonl Mining (iorp. 

Pennzoil C!o. 




ASARC:() Inc. - 


6 8 


Inspiration Consolidated Copper Co. 


Hudson Bay Mining & Smelting C:o. Ltd. 
(Clanada) Minerals & Resources Corp. I.id. 
(Bermuda) - 




Anamax Mining Co. {oi)7r) 

Copperhill and Miami operations 

Group of copper companies 




3 5 










Copper Range Co. 

Lakeshore Mine (50%) and others 


Louisiana Land and Exploration Co. 


Insig. 




Ranchers Exploration and Development 




g 


Continental mine .. _ 












Total 14 companies' copper production in U.S. 


1.464.(1 


98.2 


53.2 


33.7 


1 1 3 








l'l,490.:i 

















P Preliminary. 

' Became a wholly owned subsidiary of Standard Oil Co. of Indiana on Sept. 21, 1979. 

Source: Bureau of Mines, based on analysis of annual reports and form 10-K data submitted to Securities and Exchange Commission. 



16 



Tabic 11. — Petroleum companies' connections with the copper industry — domestic and foreign 

as of yearend 1979 



Oil and gas companies 


Interest in U.S. copper producers or copper 
lesources (l(Kation)' 


Interest in foreign copper producers or resources 








British Petroleum Co.. Ltd. 


None 


Western Mining Clorp. Ltd. 








Exxon Corp 

Getty Oil Co 




Compania Minera Disputada des Las Condes SA. 

None. 




Hudson Bay Mining and Smelting Co., Ltd.; 
Minerals and Resources Corp., Ltd. 




Whitehorse Copper Mines Ltd. 
None. 




Otcidenlal Petroleum Clorp. - _ 






Duval Corp (l()(») 


None 






Billiion United Kingdom. 








Cyprus Mines Corp. (lOO) . . . 










Union Oil Co 













' Ainounls in parentheses ( ) indicate perceni of iiiieresl. 
Source: Bureau of Mines, based on analysis oi aiuuial repoiis 



ind lorin 10-K data submitted to Sctulities and Kxcli<iui{e (ioiiunissiori. 



towards direct and indirect connections among 
producers. The major vehicle for direct con- 
nections among producers is the joint venture. 
Generally, firms enter into joint ventures in or- 
der to spread the risks involved in any given 
investment project. Within the United States, 
one example of a joint venture is Anamax Min- 
ing Co., formed in June 1973 as a joint venture 
of Amax, the Anaconda unit of Atlantic Rich- 
field, Standard Oil of California, and Selection 
Trust, Ltd. (UK). One prime example of a joint 
overseas venture is the Southern Peru Copper 
Corp. which is jointly owned by ASARCO, the 
Marmon Group, Newmont Mining Corp., and 
Phelps Dodge Overseas Capital Corp. Such joint 
ventures enable firms to participate in the prof- 
its from lower cost overseas operations while 
limiting losses in case of any future expropria- 
tion action by a host country. 

Indirect connections among U.S. copper com- 
panies — which may be described as extremely 
indirect — occur because of the representation of 
financial institutions on the board of directors 
(see table 12). These directors from financial 
institutions — many of whom are affiliated with 
the banking industry — provide expertise in set- 
ting company financial policies and provide ac- 
cess to financial markets to meet short- to-long- 
range capital requirements. Virtually all of the 
so-called Big Six copper companies have at least 
one representative of a major financial institu- 
tional on their boards of directors. The indirect 
connections between companies can occur be- 
cause a number of banks are often involved in 
major loans to a single firm. Often, one or more 



of these banks or financial institutions might be 
involved in loans to several firms in the same 
industry. As a result, information on the finan- 
cial health and plans of competing firms can 
become broadly disseminated to those financial 
officers serving on the boards of these compet- 
itors. This potential for information transfer can 
occur in the U.S. copper industry and could 
possibly have an influence on investment deci- 
sions. 

COPPER INVESTMENT STRATEGY- 
DOMESTIC VERSUS FOREIGN 

The general financial weakness of the U.S. 
copper industry during the 1969-78 period has 
apparently led these firms to strike a new bal- 
ance between domestic and foreign investment 
in copper projects. As stated in the section on 



Table 12. — Composition of boards of 
directors of copper producers, 1978 



Companies 


lotal Board 
members 


Boaixl members 

connected to 

tinancial inslittuions 


Kennetolt Copper Corp. 


IH 
17 

i:i 
u 

M 

1(1 

18 
14 
15 
10 

ft 

7 
15 


4 
4 


Atlantic Richfield Co --. 

Newmont Mining Corp. 

Pcnnzoil Co 


2 
1 
1 


ASARCO Inc - - 


2 


Inspiration Consolidated Copper Co. . 
Amax Inc. _ -- . 


1 


Cities Service Co. .-_ 

Cyprus Mines Corp 

Louisiana Land and Exploration Co. . 
Hecia Mining Co. 

Ranchers Exploration and Oevelop- 


2 
2 


1 




II 







Source: Bureau of Mines, based on analysis of annual reports atul In 
data submitted to Securities and Exchange (Commission. 



17 



theoverviewof the copper industry, U.S. copper 
companies have not yet announced plans to ex- 
pand net capacity despite the Bureau of Mines' 
forecast for needed extra domestic mine and 
refined output by the year 2000. Apparently, 
the costs of meeting environmental standards, 
the specter of futher increases in energy, labor, 
and capital costs, and the lack of high-grade ore 
have generally led U.S. copper companies to 
forestall domestic capacity expansion plans. In- 
stead most companies appear to be limiting do- 
mestic investment to mandated antipollution 
expenditures and to investments that cut costs 
of present mining and refining operations. Also, 
some of the companies are still intent on im- 
proving their balance sheets by reducing in- 
debtedness. 

On the other hand, some U.S. firms are chan- 
neling money into overseas copper ventures (see 
fig. 3), which appear more profitable than do- 
mestic ones. As mentioned previously, some of 
the overseas ventures are — 

• Compania Minera Disputada des Las 
Condes, S.A., an Exxon subsidiary in Chile. 

• Southern Peru Copper Corp. in Peru, a 
joint venture of ASARCO, Inc. the Mar- 
mon Group, Newmont Mining Corp., and 
Phelps Dodge Overseas Capital Corp. 

• Utah International, General Electric sub- 
sidiary, in an Australian venture. 

• Newmont Mining Corp., through various 
subsidiaries, in Canada and the Republic of 
South Africa. 

Apparently, the higher grade (and hence 
lower cost) deposits overseas are profitable 
enough to offset any potential risks of overseas 
operations. 

NEW FINANCING METHODS 

U.S. copper companies are also taking advan- 
tage of new methods of financing business com- 
pared to that of earlier years. Since copper prof- 
its have been low, and straight debts (debentures) 
have increased, raising the debt-equity ratio, 
several companies have instituted equity financ- 
ing through divided reinvestment plans to lower 
the debt-equity ratio. This financing plan per- 
mits quarterly investments by shareholders; in 
addition to dividends, an amount usually from 
$25 up to a maximum of $3,000 can be invested. 
Although participation is stricdy voluntary, some 




Figure 3. Leading U.S. copper producers, for- 
eign investment flows. 

Source: Bureau of l\/lines, based on analysis 
of annual reports and form 10-K data 
submitted to Securities and Ex- 
change Commission. 



shareholders take advantage of this free service 
because they can avoid paying broker's com- 
missions. Furthermore, U.S. copper producers 
with multinational operations have access to in- 
ternational money markets to finance copper 
projects in foreign countries. The issuance of 
debt instruments, such as Eurobonds, may be an 
advantage when interest rates and foreign ex- 
change rates are considered. 

In some cases, domestic copper producers 
may receive assistance from the respective State 
and local governments by financing antipollu- 



18 



tion facilities with tax-exempt revenue bonds. 
Though these bonds are issued by the govern- 
ments, the repayment and costs of funds are 
guaranteed by the respective copper company. 
The tax-exempt status of the bonds reduces in- 
terest payments and thus cuts the cost of pol- 
lution control facilities. 

Another finacing vehicle used to raise im- 
mediate working capital is to obtain a commit- 
ment of several financial institutions for letters 
of credit that are needed to support the com- 
pany's issuance of commercial paper. Commer- 
cial paper, which is virtually a corporate signa- 
ture loan, can be used as a way of obtaining 
short-term funds at interest rates that are often 
less than those charged by banks. 

Project financing is a way of raising funds that 
has facilitated joint ventures for new mines. It 
came into wide use when capital costs increased 
sharply and leading institutions began to require 
greater amounts of equity interest as a condition 
for lending. This system of financing can be a 
little more expensive than borrowing on the 
strength of the primary companies' financial- 
economic position, but the loan need not be re- 



flected on their financial statements. Thus, a 
project loan need not affect a firm's credit stand- 
ing. This type of financing also reduces the total 
capital contribution of any one company. 

Similar financing instituted on an interna- 
tional basis may involve several companies with 
one in each of three basic categories, "investor- 
host-market." In this instance, "investor" (sup- 
plier) represents the financing and technological 
capability (generally U.S.); the "host" represents 
the mineral resource country; and the "market" 
represents the consuming country or firm. A 
sales contract for the project's output is com- 
monly required before full financing can be ar- 
ranged (26-28). The contract serves the purpose 
of guaranteeing a market for raw material (con- 
centrate and blister copper). The supplier's 
credits (investor) are loans or loan guarantees 
by agencies such as the U.S. Export-Import 
Bank (25) for the purchase of supplies and 
equipment by the foreign producing firm from 
U.S. equipment manufacturers. The consuming 
country (the U.S. copper company) may also be 
a source of long-term funds — it may lend capital 
against long-term supply contracts. 



19 



SUMMARY OF TRENDS IN THE U.S. COPPER INDUSTRY AND 

CONCLUSIONS 



In addition to facing geologic uncertainty, 
over the 1969-78 period the U.S. copper in- 
dustry has faced higher production costs, lower 
ore grades, mandated investments in pollution 
control equipment, and greater competition 
from lower cost foreign producers. Together, 
these and other factors led to a deterioration in 
the financial health of the U.S. copper industry 
as measured by lower rates of return on share- 
holders' equity and, in some cases, an inability 
to raise needed funds from capital markets. 

Several changes have taken place that should 
improve the financial health of the U.S. copper 
industry. These dynamic changes included: 

• Diversification and merger. Some oil com- 
panies acquired copper companies, and 
others established their own copper subsi- 
diaries, while the remaining copper com- 
panies have diversified their product base. 

• The use of joint ventures to spread the risks 
of copper mining projects, particularly in 
overseas operations, and the increased re- 
liance on the financial community — with its 
internal connections — for advice on financ- 
ing and access to capital markets. 

• The shift in investment strategy toward the 
expansion of capacity in low-cost foreign 
producing countries, while generally lim- 
iting U.S. investment to mandated environ- 
mental expenses and equipment that in- 
crease the productivity of present operations. 

• The use of new financing methods, partic- 
ularly project financing, as a way of limiting 
a firm's investment in foreign ventures. 

These measures are likely to raise the rate of 
return on shareholders' equity and improve the 
financial health of the U.S. copper industry over 
the medium term. Domestic capacity expansion, 
which the Bureau of Mines estimates will be 



needed during the next 20 years, is apparently 
being held back until the long-term real copper 
price rises enough to make such domestic ven- 
tures more profitable. Without the improved 
financial health that will result from these ac- 
tions, the U.S. copper companies would not have 
the financial resources to expand domestic op- 
erations when future market conditions are fa- 
vorable. 

The Nation's future copper supply decisions 
and policymaking processes will involve four 
dynamic organizations: First, the Federal Gov- 
ernment, to cover the Nation's social and eco- 
nomic policies, placing different priorities in the 
area of foreign exchange, revenues, and em- 
ployment levels; second, the private banks and 
other lending institutions, to safeguard their 
loans to copper producers and to state-owned 
copper companies of foreign governments; third, 
the independent U.S. copper firms, interested 
in the economics of copper mining, that is, an 
adequate rate of return on capital employed 
commensurate with the degree of risk; fourth, 
the oil companies with copper interests, the new 
participants with excellent financial position and 
with top credit ratings. The oil companies' im- 
mediate contributions should be to lower the 
financing cost of capital for expansion and im- 
provement of mines, possibly in the range of 
100 to 200 basis points. The interactions of these 
four institutions in the Nation's copper deci- 
sionmaking process should lead to a policy for 
a healthy and competitive U.S. copper industry. 

In aggregate, the U.S. copper industry is fi- 
nancially stronger than a few years ago. Already, 
several copper corporations have made huge in- 
vestments overseas in copper, individually and 
through joint ventures to diversify geographi- 
cally their copper production. 



20 



REFERENCES 



9. 



1. Amax Inc. 1978 Form 10-K. 93 pp. 

2. ASARCO Inc. 1978 Form 10-K. 112 pp. 
Atlantic Richfield Co. 1978 Form 10-K. 73 pp. 
Cities Service Co. 1978 Form 10-K. 65 pp. 
Coopers &: Lybrand. Financial Reporting and Tax Prac- 
tices in Nonferrous Mining. 1 18 pp. 
Cyprus Mines Corp. 1978 Form 10-K. 72 pp. 
Drucker, P.F. America's Next Twenty Years. 1957, 1 14 
pp. 

Financial Accounting Standard Board (New York). 
Statement of Financial Accounting Standards. No. 8, 
October 1975, 103 pp. 

First National Bank (New York). Monthly Economic 
Letter. May 1978, 12 pp. 

10. Hecia Mining Co. 1978 Form 10-K. 44 pp. 

11. Inspiration Consolidated (>)pper (>). 1978 Form 10-K. 
25 pp. 

12. Kennecott Copper Corp. 1978 Form 10-K. 73 pp. 

13. Kennecott Copper Corp. 1979 Second Quarter Report. 

Leith, C.K. Minerals Valuation of the Future. National 
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Louisiana Land and Exploration Co. 1978 Form 10-K. 
50 pp. 

National Academy of Sciences. Review of National Min- 
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Technological Innovations and Forces for (Change 



14 



15 



16 



17. 



in the Mineral Industry. 1978, 74 pp. 

18. Newmoni Mining Corp. 1978 Form 10-K. 149 pp. 

19. Pennzoil Co. 1978 Form 10-K. 78 pp. 

20. Phelps Dodge Corp. 1978 Form 10-K. 69 pp. 

21. Ranchers Exploration and Development C^orp. 1978 
Form 10-K. 25 pp. 

22. Schroeder, H.J. Copper. BuMines Mineral Commodity 
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23. U.S. Bureau of Mines. Mineral Facts and Problems. Bull. 
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667, 1975. 1259 pp. 

24. U.S. Congress. Defense Production Act of 1950. Public 
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25. . Export-Import Bank Act of 1945. Public Law 

79-173, July 31, 1945, 58 Stat. 526. 



26. . Foreign Assistance Act of 1961. Public Law 87- 

195. Sept. 4, 1961, 75 Stat. 424. 

27. . Foreign Assistance Act of 1969. Public Law 91- 

175. Dec. 30, 1969, 83 Stat. 805. 

28. . Inter-American Development Bank Act. Public 

Law 86-147, Aug. 7, 1959, 73 Stat. 299. 

29. . Mining and Minerals Policy Act of 1970. Public 

Law 91-631, Dec 31, 1970, 84 Stat. 1876. 

30. . Strategic and Critical Materials Stock Piling Act 

of 1946. Public Law 79-520, July 23, 1946, 60 Slat. 596. 

31. . Strategic and Critical Materials Stock Piling Re- 
vision Act of 1979. Public Law 96-41, July 30, 1979, 93 
Stat. 319. 

32. . Strategic War Materials Act of 1939. Public Law 

76-1 17, June 7, 1939, 53 Stat. 811. 

33. U.S. Department of (>ommerce. The Potential Economic 
Impact of U.S. Regulations on the U.S. (Copper Indus- 
try. April 1979, 176 pp. 

34. U.S. Department of the Treasury. A Tax Analysis Re- 
port of the U.S. Corporations' Income Tax Returns. 
1976, 57 pp. 

35. U.S. Environmental Protection Agency. Primary Non- 
ferrous Smelter Orders. Federal Register, v. 44, No. 22, 
|an. 31, 1979, pp. 6284-6337; v. 44, No. 40, Feb. 27, 
1979, pp. 11096-11098. 

36. U.S. General Accounting Office. The U.S. Mining and 
Mineral Processing Industry: An Analysis of Trends and 
Implications. Oct. 31, 1979, 87 pp. 

37. U.S. International Trade (lommission. Unalloyed Un- 
wrought Copper. Pub. 905, August 1978, 1 1 I pp. 

38. U.S. National (Commission on Materials Policy. Material 
Needs and the Environment Today and Tomorrow. 
June 1973, 286 pp. 

39. U.S. Office of the Special Representative for Trade 
Negotiation. USITC; Sec. 201 Rep. on (Copper, TPSC 
Doc. 78-131, Oct. 10, 1978, 61 pp. 

40. U.S. President's Materials Policy Commission. Resources 
for Freedom. June 1952, v. 1-2, 394 pp. 

41. UV Industries Inc. 1978 Form 10-K. 70 pp. 



*U S GOVERNMENT PRINTING OFFICE: 1980 329-043/6578 



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